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Saturday, October 22, 2011

How difficult or easy it is to open a simple savings bank account? Or rather the question should be – should it be difficult or easy? Should the system be encouraging for common people to open accounts or stringent and drive them away as much as possible? Here is a real life experience on opening a bank
account for our housemaid. This happened in Ahmedabad.

Context

Our house maid Sheela (name changed) wanted to get a bank account opened. All these years she was spending on various family needs and till now couldn’t really save money. Now, after hearing advices from many educated people, she made up her mind to save money for future.

Sheela is married, but no longer living with her husband. She stays at her father’s place, where her brothers and their family members live too.

PART 1 – Initial Attempts

First Attempt was a failure (Early Oct 2011)

Couple of weeks back Sheela directly went to one of the SBI branches nearby and tried to get a savings bank account opened. But she was sent back saying she doesn’t have sufficient documentations. Not knowing what else to do, she sought our help.

I didn’t even bother to check with her if bank employees provided her with alternatives etc. Going out of the way is not a norm in India anyway. I just thought it would be easier if I enter the field and help her out. She said she has PAN card and Ration Card, and it sounded good enough to me.

I entered the (battle?) field (Oct 22)

Today I visited the same SBI branch. It was around 10:15am and hardly any staff was present. Wasn’t bank supposed to open at 10am? Anyway, I thought may be most people are on leave due to Deepavali (Diwali). However, when I asked a person he said “No, no everyone is here”.

The person was busy doing something seriously on his mobile, but he was ‘courteous’ enough to ask me what I need. I started explaining, but I was not at all sure whether he was listening properly or if his concentration was at his cell phone project. He was multi tasking and was responding to me intermittently with pauses and breaks as if he was doing a great favor; I continued with patience. In some time however, I increasingly got dissatisfied with his answers, mainly around the subject of address proof. Some highlights of our discussion were:

- He seemed to have an impression that a woman, if married should bring address proof of her husband’s residence itself and living with parents is not a ‘normal’ scenario. I initially brushed it aside politely but finally strongly challenged legality or sensibility of such a rule. “Why are you unnecessarily complicating current address proof requirements? A person can live wherever, all you need is address proof, right?” I asked strongly.

- He claimed Ration Card is no longer accepted as valid address proof. One more senior employee in the branch also had supported his claim. Their explanation was that KYC norms have become too strict and Ration Cards are easily manipulated by paying bribes.

- However, they suggested some workaround which clearly were illegal (they suggested we can write a letter saying the main lives with us and provide our address proof!). Of course, they were trying to help, but later I found that they could have helped with more legal alternatives, more on this later in this article.

- At one point, he sort of suggested a letter from her father too, along with utility bills, but insisted that he should be existing SBI account holder. They didn’t explain it properly; at that stage, they just wanted to avoid me and said “You read the application form thoroughly and do as per that”.

- Last but not least, he suggested that eventually I may not be able to get the account opened for our maid. Apparently another person had tried similar thing in the past for a maid who had come from a different state, and finally left without being able to open the account. I was saddened to hear it, but said our maid is a local person and complications should be lesser.

Even simple task of getting application form was not easy

Overall I was annoyed and decided to just take the application form and return. However, even this was not straight forward. The concerned person was not at his desk even at 10:35am. After waiting for 5 min, I walked to manager’s desk and politely asked “Madam, would you have a copy of the form for opening a savings bank account please?” She seemed a bit annoyed when she learnt that the person was not at his desk, but she was very polite with me. Then she immediately called some other person and got me the form.

The manager looked quite tough on bank employees, but seemed to have customer orientation. I felt a bit relieved and thought I will directly go to her next time if I hear less satisfactory or unreasonable replies from others.

PART 2 – Further Research and Thoughts

A task which I thought would be almost a cake walk with a PAN card and Ration Card had turned out to be something complex. What pained me most is the fact that the sufferer here represented a big majority of people in India who survive with low income.

This prompted me to start thinking further deep into this and began my research.

Summary of Part 2, if you don’t want to read in detail

- RBI guidelines seem to be quite fine, but I didn’t find SBI operating under true spirit of RBI guidelines

- I felt SBI is definitely not encouraging poor people, in fact they seem to discourage

- As I observed, SBI’s information is not consistent when forms and website is compared

- In general, I feel PAN card should be sufficient to open a simple bank account, why not?

Some thoughts on Ration Card

First of all, let us note one important thing. Ration Card is still perfectly acceptable for Passport services! Is a normal savings bank account more important and critical compared to a passport?!! I wondered – passport involves national security, isn’t it?! Is it less important compared to financial frauds?

Also, to my surprise, I noticed that the SBI application form still had Ration Card listed. Let’s take a look at the list of acceptable address proof as per SBI.

Credit Card Statement

Out of question for poor people

Income Tax/Wealth Tax Assessment Order

Out of question for poor people

Telephone bill

If at all there is a BSNL landline connection at home, it will be in the name of family head. Others cannot produce it.

This is the only document in the list which all family members can easily produce

Salary Slip (with address)

Same as letter from employer

Electricity bill

Same case as telephone bill.

Bank account statement

Most poor people won’t have even single bank account, how can they produce this when they try for the first one?

Letter from any recognized public authority

We all know it is not easy to get such a letter and there is absolutely no elaboration on what this is

Overall, I felt it is extremely unfair if Ration Card was denied as address proof.

Experience with SBI Customer Care, no much luck

I decided to call SBI Customer Care and see what they say on Ration Card. All the toll free numbers failed and finally I was able to call Gujarat helpline. Conversation is approximately as below:

Me: Hi, I visited one of your branches today to open a savings bank account and learnt you don’t take Ration Card as valid address proof anymore, is this correct?

CC: Yes, you are right.

Me: But your own application form has it listed

CC: May be it is old form

Me: It looks new, I just got it today

CC: It must be old

Me: I am unable to find any such information online, could you please help?

CC: You better talk to my manager, I will transfer the call

After a 2 min break, I got connected to the manager of helpline. The conversation went at a depth and here is the summary:

ØHe agreed that

oThe customer grievance is very valid

oMany cases are sent back even though bank officers know that they are genuine

oBecause of stricter KYC norms and checks, now banks are in embarrassing situation, unable to help needy customers

ØHe politely refused to provide alternative ideas and suggested it is best to discuss with branch manager in detail. Because if suggests something and later manager doesn’t approve, it will be unnecessary annoyance to me, he explained. However, he gave some hints like LIC policy etc. I said I will check on that.

Incomplete address in Ration Card? Is that the real issue?

One of the points that was told me (don’t remember whether this was at bank or by helpline person) was that blame should be on Ration Card officials who generally record ‘incomplete’ address in it which led to such rejections from banks, and also new change in rule.

I was annoyed at the whole thing and wrote following letter to RBI, through website, waiting for response.

Siting stringent KYC norms as the reason, banks are not accepting Ration Card as valid address proof even for opening savings bank account. They say even if they accept upon customer's insistence it will be later rejected by KYC checking authorities. Bank people agree with us that this is a genuine concern but express helplessness. As I see, this is causing lot of problems for many common people of India. Kindly help.

RBI is fine with Ration Card as address proof

I was restless and not satisfied, hence checked RBI website for more information. After some search I found KYC guidelines related links. Here is a link for one such master circular:

As you can see, in the RBI website Ration Card is clearly listed as one of the acceptable documents. And this master circular is updated on Jul 1, 2011. I was encouraged to read this further, reading end to end was a challenge and I confess I did not do such a thorough job. However, here are some interesting points:

(v) Ration card
(vi) Letter from employer (subject to satisfaction of the bank)( any one document which provides customer information to the satisfaction of the bank will suffice )

Let’s carefully note the last sentence: so, if banks seem to have authority to take decisions if they are ‘satisfied’ i.e. convinced. Then why they express helplessness and get embarrassed without helping genuine and needy low income people? Also, the above list is just an indicative list to the banks as per RBI. Bank people’s claim of helplessness seems to be flawed somewhere, isn’t it?

RBI guidelines on utility bills are friendly – but banks make it complicated

KYC norms published by RBI has a dedicated section for Customer Identification Procedure (CIP). Please have a look at following excerpt:

d) It has been observed that some close relatives, e.g. wife, son, daughter andparents, etc. who live with their husband, father/mother and son, as the case may be, are finding it difficult to open account in some banks as the utility bills required for address verification are not in their name. It is clarified, that in such cases, banks can obtain an identity document and a utility bill of the relative with whom the prospective customer is living along with a declaration from the relative that the said person (prospective customer) wanting to open an account is a relative and is staying with him/her. Banks can use any supplementary evidence such as a letter received through post for further verification of the address. While issuing operational instructions to the branches on the subject, banks should keep in mind the spirit of instructions issued by the Reserve Bank and avoid undue hardships to individuals who are, otherwise, classified as low risk customers.

The above guidelines nowhere states that such relative should be account holder of the bank. But SBI has made that extra layer, just to safeguard themselves and also probably to simplify their procedures. Is it fair to be so stringent even in the case of low income category people?

Oh wait, SBI website says something different!!

Before closing down my research for the day, I decide to explore SBI website a little more. In a slightly unintuitive place (Home > Personal Banking > Deposit Schemes > KYC Guidelines), I found KYC Guidelines. I have added the content as appendix at the end of this post.

And to my surprise, the information here was slightly different than what was mentioned in application I received today. So, which one to believe? I am confused.

And just to stress the point, SBI website also has information different than RBI guidelines.

General Question in mind about PAN card – Isn’t it our ‘Financial Identity’?

I really don’t understand why there is such a big fuss about address proof for opening simple savings bank account. And moreover, why PAN card cannot suffice as a single proof for all financial matters? Its after all our financial identity, isn’t it?

If address proof requirements are stringent for getting a PAN card or updating address in PAN card, I can totally understand. But once you have PAN card, why can’t banks simply accept it and open bank account?

Another general question: How much banks follow RBI guidelines?

KYC norms published by RBI has a dedicated section for Customer Identification Procedure (CIP). Please have a look at following excerpt:

e) Banks should introduce a system of periodical updation of customer identification data (including photograph/s) after the account is opened. The periodicity of such updation should not be less than once in five years in case of low risk category customers and not less than once in two years in case of high and medium risk categories.

Interesting, contrary to the above guideline the banks have very lenient rules. Take the following example: In ICICI if you already have a bank account which is active for more than 6 months, you don’t have to provide new address proof for changing the address. I just have to give a PAN card and provide new address! This way, when I move to new town, it is easy for me to change my existing bank account address and provide it as address proof! But can a poor person do such things when is trying for his first ever bank account?

Overall, are poor people discouraged if not totally denied access to banks?

Overall, why are we making life difficult for such low income people? Such discouragement is practically no different than denial. In fact, we should be encouraging them as much as possible to open bank accounts and protect their future.

People from affordable class somehow manage all the rules by somehow giving various kinds of documentation. But poor people need extensive help and encouragement, which I think is social responsibility of banks.

RBI, while publishing KYC norms, has specifically encouraged banks not to deny anyone access to banking. Under dedicated section for Customer Identification Procedure (CIP), please have a look at following excerpt:

g) It has been brought to our notice that the said indicative list furnished inAnnex -I, is being treated by some banks as an exhaustive list as a result of which a section of public is being denied access to banking services. Banks are, therefore, advised to take a review of their extant internal instructions in this regard.

Also, under the Customer Acceptance Policy (CAP) of KYC norms, RBI clearly says that low income people should be considered as low risk. Please have a look at another excerpt (from under Customer Acceptance Policy (CAP) of KYC norms) given below where it instructs banks not to become too stringent towards such people and ultimately deny them the banking access.

d) It is importantto bear in mind thatthe adoption of customer acceptancepolicy and its implementation should not become too restrictive and must not result in denial of banking services to general public, especially to those, who are financially or socially disadvantaged.

Liberalized KYC norms – Small Accounts

While reading through RBI documentation, concept of ‘Small Account’ caught my attention. Though I think the amounts mentioned under that can be increased, it is nevertheless an attempt by RBI to help numerous poor people in India.

However, banks do not seem to encourage this at all. After I observed this provision, I studied the application form again and found this at one place. However, the fine prints of small accounts were different than RBI guidelines. The SBI website also has something different, though differences are small. But the question is which one to believe. And most importantly why bank employees are not encouraging people like house maids to utilize this friendly provision?

Also, these accounts are associated with some risks with respect to what happens if upper limits are exceeded. There is no clarity on exact course of actions upon reaching such state, related timelines and possible exceptions.

A unique case of privacy and piracy

I want to conclude today’s article with a unique challenge for banking industry.

Let’s take the very case of Sheela where I am trying to help. Sheela wants to open the account but wanted family members unaware of it, as much as possible. She is no longer with her husband and supporting her son alone. On top of this, during last few years she has spent huge money on her current home i.e. where her parents and brothers live. She hasn’t saved any money for future. Last year she saved a decent money which was wasted by one of the family members without her consent. So, finally now she feels it is important if she has to save money for future. But she is very soft hearted and gets exploited if others know she has cash. Only way is to keep her account as secret as possible.

And numerous women in our country share similar stories, to best of my knowledge. Can banking industry provide some unique solutions for these genuine cases?

xi) Certificate issued by hostel and also, proof of residence incorporating local address, as well aspermanent address issued by respective hostel warden of aforesaid University/institute where the student resides, duly countersigned by the Registrar/Principal/Dean of Student Welfare.Such accounts should be closed on completion of education/ leaving the University/ Institute.

xii) For students residing with relatives, address proof of relatives along with their identity proof, can also be accepted provided declaration is given by the relative that the student is related to him and is staying with him.

Small Deposit Accounts:

Branches may open accounts for those customers who are in no position to submit the above mentioned documents provided they intend to maintain balances not exceeding Rs. 50,000/- (Rupees Fifty Thousand only) in all their accounts taken together and the total credit summation in all the accounts taken together is not expected to exceed Rs.1,00,000/- (Rupees One Lac only) in a year, subject to:

a)

Introduction from another account holder who has been subjected to full KYC procedure. The introducer’s account with the bank should be at least six months old and should show satisfactory transactions. Photograph of the customer who proposes to open the account and also his address needs to be certified by the introducer.

(OR)

b)

At villages, Kisan Bahi/Kisan Passbook issued by revenue authorities and containing photograph/address of the land holder will be accepted.

c)

Any other evidence as to the identity and address of the customer to the satisfaction of the bank.

However, if at any point of time, the balances in the accounts of such customers with the Bank (taken together) and the total credit summation exceed the above threshold, no further transactions will be permitted until full KYC procedures are completed.

Due to Diwali, Sheela couldn’t keep aside time to fill up the application form and yesterday was the day. Could Sheela fill up the application form herself? No way, the application form was bit complex and detailed application form and had to be carefully filled. So exactly what is a moderately educated Indian supposed to do if bank people don’t voluntarily help? Answer is simple – they wait until someone help them, they wait for years sometimes or until something bad happens in their lives!

After sometime I realized that the complexity in the application form was mainly due to cluttered nature of the form, in an attempt to use both English and Hindi in the same form. (Why couldn’t they just provide separate forms in different languages or at least make this easy to read?!) It was interesting to note that the application form didn’t contain Gujarati language at all.

Which account we should go for?

Sheela had PAN card + electricity bill that is in her father’s name. But based on my earlier talks with bank officials I wasn’t sure if they would accept the latter as address proof. Hence, I had decided that first we will get her ‘small account’ opened. It has a max cap of Rs.50,000/- but it was a huge amount for her, very difficult to accomplish and hence it was okay.

I also explained her in detail about nominee, how it works etc. She had no clue whatsoever about those things.

Date of birth incorrect in PAN card? What next?

While filling the application form I noticed that Sheela was born on 1984, which means she is around 27 now. But she already has a 11 year old son. Poor girl, I thought, as she was probably married at the age of 15 or earlier.

However, on the way, when I checked with her, she said she was born on 1980. OOPS!! And her birth day was also incorrect. Now what to do? I thought. When I checked about birth certificate, she said it was somewhere hidden when she applied for PAN card and something probably went wrong with DoB.

I told her that it is better to get it corrected, now that she has birth certificate. However, I learnt that she has a totally different name in birth certificate. Knowing how strict and demanding PAN card officials might be, I thought correction won’t be easy. Shela studied only till 8th standard and didn’t even hae SSLC certificate. The question of how initially she managed to get PAN card and what documents she provided at that time. It was done one year back and she had no clue; she had gotten it done through an agent near her home by paying Rs.250/- and I thought maybe he provided some fake documents for her DoB proof.

Anyway, as she has a ‘valid’ PAN card which has correct name, it doesn’t matter much at the moment, I thought and we proceeded.

Verification of the application form

Since it was Saturday, the banks close several operations by 12pm and it was already 1pm. However, we went to double check. As expected, we were asked to come again on Monday. But I requested if they can at least verify the application form, and the elderly gentleman agreed. (This person is same as the other senior bank employee I mentioned earlier who affirmed that ration card is no longer accepted as address proof).

As the opening note of the conversation, I mentioned that we have some address proof but if it is not acceptable, then we request for a Small Account. The person didn’t seem to have a clue of what a Small Account is. I explained briefly and he seemed very confused. Then I showed the application form where it was mentioned and then to hide his ignorance, he started acting as if the electricity bill is sufficient proof for address proof. The name of Sheela’s father in PAN card and electricity bill more or less matched and he seemed to be ok accepting it. I was happy of course, if it resulted in her getting a normal savings bank account opened.

Today we went to the bank again. Though the person was quite slow in processing things, he verified the form and accepted it. Not sure if he would have been that way if I was not there in the scene, but he was friendly with Sheela and helped with some good suggestions. He questioned the need of the cheque book as it costs money unnecessarily. Instead, he suggested ATM card is more than sufficient though for her needs it costs Rs.50/- per year; we had already requested for ATM card in the application form and agreed to remove cheque book request.

Minimum Balance

When I checked about minimum balance, we were told that it is Rs.500/- for accounts without cheque book and Rs.1000/- for accounts with cheque book. He hadn’t explained this point while suggesting against cheque book, but at least I got to know now, thought!

But he did mention about the fine part i.e. if the balance goes below minimum balance, then there is a whopping fine of Rs.250/- Though I explained this part of Sheela very clearly, I felt a need to find out more about this. Will bank people caution these kind of people if they try to withdraw more money? Do ATM machines caution in that fashion? Is there a concept of minimum average balance in SBI or will the fine be applicable if the amount goes below the minimum amount even once? So many questions that I need to further research on, isn’t it?

Other cautions and advices related to banking

Even educated people need to spend time to understand various intricacies of banking which is important to even most common account holder these days.

Let’s take ATM card related cautions – importance and limitation of PIN, what happens if card is stolen, is there any protection against theft etc.

I guess it is too much to expect from these bank people to explain these to common person. I educated Sheela few things about ATM card, and need to educate further about usage etc. when she actually gets the card. She is currently with mixed emotions about the card, excited about easy withdrawal of money but worried about safe keeping of the card.

Next thing is about Fixed Deposits or other schemes (other than risky mutual funds!) through which she can earn higher interest rates instead of just keeping money in savings bank account. Again, the burden is on me to educate her more in this regard. Not sure if bank manager will agree to arrange a patient session to people like this if I request, I will first get clarity on their requirements myself before approaching bank manager with such a request.

Today’s last step – initial deposit

Sheela’s Oct month’s salary + diwali bonus was her initial deposit. Again, I helped her by writing the deposit slip and wondered if she will be able to do it herself from next time onwards. Maybe yes, after some training.

We were told to come tomorrow and get the passbook. ATM card is expected to come to her home address (maybe after 10 days or so, I assumed). Hope there are no more surprises after further verification of the proofs we provided, keeping fingers crossed!

What next?

Along with further educating Sheela about banking, one more maid is getting ready to get my help and get the account opened. (I had myself told Sheela to tell others also if they need any help related to banking). Let’s see how it goes!

Last but not least, if time permits I also have plans to create two documents for the benefits of these kinds of people:

- A simple flow chart explaining steps to open account

- Simple set of dos and donts

I plan to get someone’s help and translate them in Gujarati too. I also plan to give copies to bank, and if they agree to handover it to common people whenever applicable, it would be great. Not sure if last part will happen as bank might be reluctant to play part in such informal process, even with disclaimers etc. Wish me luck :-)

Update and Closure on Aug 2012: I
just wanted to add this brief update and closure as I couldn’t continue writing
the story after Part 4.

-Things were not smooth even after
opening the bank account for Sheela. There were issues related to cheque book
and debit card too; there were promises of help from bank folks which they didn’t
provide later. And every time I had to struggle with bank officials. It was
obvious to me that Sheela alone could not have handled any of it.

-The other maid who wanted my help
somehow didn’t put a step forward, so that aspect died there itself.

-I provided some documented help
to Sheela on some important aspects both in Hindi and English and another lady
agreed to take up the responsibility of helping her whenever needed. Also, my
wife and I are available over the phone if Sheela needs anything. The end!

While we are on the topic of banks (especially the public sector), it looks like customer-friendliness is the last thing on their mind. For example, look at the forms that are there in the bank for deposit/DD/withdrawal etc. These forms are filled with bank jargon instead of explaining the customer what needs to be done.

Coming to the present episode, basically I see a lack of service attitude, which probably comes since people are not exactly proud of their jobs. It is all pervasive in our society -- from public sector to private (though there may be a few exceptions).

All the best, Shastry. Earlier these type of difficulties were huge. Nowadays, atleast few are there to listen & act. Be strong. Meet the superior, whoever available in that city.ಸಾಮ, ದಾನ, ದಂಡ. ಈಗ ದಂಡದ ಅವಶ್ಯಕತೆ ಬಂದಿದೆ!But, SBI is better than other private sector banks, once you are thru'.

PAN card application needs photos & address proof. No need of date of birth proof. But, it is a surprise that PAN card is the most valuable birth date proof acceptable for all (including to get Life insurance coverage!).

I totally agree that Indian Banks make it very difficult for any person from the unorganized sector/ seff-employed persons to open a simple Savings Bank Account. Boo to these banks. And to think that Government is increasingly using Bank accounts to make payments for NREGA, LPG subsidy and what not. Proof of residence is important if Bank has to give Loans, but what is so great about allowing someone to deposit money and make transactions of his own? This poor system needs immediate review by RBI, so that poor people do not continue to suffer under complex and discretionary rules for opening Bank accounts.

I also faced the same problem in Chandigarh. Modi ho ya Soniya : nothing can be changed in our country. That's why we should give one chance to AAP nationalwide. I am still trying to open a saving account of my mother with one of SBI branch in Chandigarh. My mother has all proofs of Himachal Pradesh. We reside in chandigarh and I have also all the proofs of mine of our chandigarh address. But they refused to open the account explaining : bring her resident proof of chandigarh. My mobile number is : 7508140759. If someone has solution please call me. I am also planning to go RBI.

very Nice information. If someone applied for PAN card and want to know their PAN card status, then you can know by various tactics. You can Know Your PAN by Date of Birth, by name and by acknowledged no.